buying used car smarter than buying new?

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GordonG
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buying used car smarter than buying new?

Post by GordonG » Mon Aug 15, 2016 9:56 am

From what I've read, it seems that buying used is usually a smarter choice. For example, I can get a 2014 SUV for about $18,500. The comparable 2016 model starts at about $26K. That's almost a 30% savings. I like the idea of someone else taking that initial depreciation hit. The used SUV is low mileage (around 30K) and comes with a decent warranty.

Also, regarding financing: what is the general Bogleheads advice? In this scenario, is it better to pay cash or finance? I've read advice that advocates both ways. On one hand, if I get a low interest rate loan, say 4%, I could keep a large sum of my money invested and (maybe) make more than that. On the other hand, I've heard advice saying "cash is king", and it's better to just buy it outright. I have a significant amount saved, so spending this amount of money right now would not put me in any kind of financial jeopardy. Not sure if it's the wisest move, but paying cash is what I'd prefer.

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Re: buying used car smarter than buying new?

Post by livesoft » Mon Aug 15, 2016 10:00 am

I bought used (after negotiating with my checkbook in hand) and got a 0% loan.

Financing depends on the interest rate and your personal circumstances.
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stoptothink
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Re: buying used car smarter than buying new?

Post by stoptothink » Mon Aug 15, 2016 10:03 am

GordonG wrote:From what I've read, it seems that buying used is usually a smarter choice. For example, I can get a 2014 SUV for about $18,500. The comparable 2016 model starts at about $26K. That's almost a 30% savings. I like the idea of someone else taking that initial depreciation hit. The used SUV is low mileage (around 30K) and comes with a decent warranty.
This is the traditional viewpoint, but it really depends nowadays. Depending on the car you are looking to buy, it can definitely be better to simply buy new.

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dm200
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Re: buying used car smarter than buying new?

Post by dm200 » Mon Aug 15, 2016 10:11 am

The subject has been discussed and debated here a lot.

Over the decades, we have purchased some of each. There are, in my opinion and experience, many advantages of buying new:

1. You can get the exact (or near exact) vehicle you want and are willing to pay for.

2. Most of the time, buying new can get a vehicle significantly under the MSRP. Wearing my auto lending hat, I see a very wide varioation in what purchasers of new cars pay - some pay a lot over MSRP and some well under.

3. If you keep a car for a long time (we do and have done), the costs per year are modest.

4. Warranties are generally better on new vehicles

5. The advantages of buying new probably, in most cases, apply primarily when you plan on driving quite a bit - perhaps over 10-12,000 per year.

Now, my wife and I (semi-retired) are going with older used cars since our mileage on cars has dropped a lot.

Rupert
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Re: buying used car smarter than buying new?

Post by Rupert » Mon Aug 15, 2016 10:13 am

The make and model of the car matters. I have found that you don't save much by buying a gently used Honda or Toyota. You can get great deals, however, on used, less popular cars. It also matters how long you keep a car. Buying new makes more sense if you're the kind of person who keeps cars ten years. If you're the kind of person who desires a new-to-you car every 4 or 5 years, I think buying used makes more sense.

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Re: buying used car smarter than buying new?

Post by hcj » Mon Aug 15, 2016 10:25 am

We started out buying new but have moved to buying used, and think the ones getting close to warranty expiration are the best value.

Our bought-new cars are still running well in their second decade, and this has made me view the useful life of a car differently.

Dicast
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Re: buying used car smarter than buying new?

Post by Dicast » Mon Aug 15, 2016 10:37 am

I think the frequency that you switch to another vehicle is probably more important than whether you buy used or new.

A low mileage used SUV for 30% off seems like a good deal.

I bought my car used because it had depreciated 50% at 3 years old with 40k miles on it. Bought my wife's car new because the SUV we were looking at didn't depreciate much at 2-3 years old and my wife tends to drive vehicles well beyond 100k and I wouldn't be surprised to get 10+ years out of the vehicle.

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dm200
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Re: buying used car smarter than buying new?

Post by dm200 » Mon Aug 15, 2016 10:40 am

Especially if you have excellent credit, new (or late model) auto loan financing has very low interest rates. It can make a lot of sense to finance a car purchase so you can reduce other consumer credit balances and/or fund longer term investmnts.
I can get a 2014 SUV for about $18,500. The comparable 2016 model starts at about $26K. That's almost a 30% savings. I like the idea of someone else taking that initial depreciation hit. The used SUV is low mileage (around 30K) and comes with a decent warranty.
I would not consider two model years old at 30,000 miles as "low mileage". Let's say you drive 15,000 miles per year and target 150,000 miles and ten years on a vehicle. Using your numbers and assuming zero value at the end of life (10 years and 150,000 miles), that would be $2,600 per year for the new SUV and $2,313 per year for the used one (8 more years). That is less than $300 per year difference. It would not be unreasonable that the used vehicle would (or might) have maintenance/repair costs higher than the new one.

I think the "depreciation hit" for the first few years is often overestimated. Using your $26K (I assume MSRP), and if you could get it for $25,000 - then the new/used difference narrows.

Some long time friends of ours have purchased mini-vans for many decades - and drive them a long time. In recent years, they purchased late model used. Last month, when their minivan died, they purchased a new model because (to their surprise) there was no real break on a late model used.

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Re: buying used car smarter than buying new?

Post by jarhead1 » Mon Aug 15, 2016 10:41 am

I was a new car buyer because I know the junk (1970's) my father traded in, but times have changed in regards to quality and availability.
I just bought two beautiful used cars last year. 2013 Subaru outback and 2014 Nissan maxima, paid cash. please note they are certified pre-owned by the manufacturer. I would not do it any other way, unless you just want an low priced egg beater to get you around. I went to the car guru website and searched.
Also I drive cars into the ground. Last car I had was a 1996 Subaru legacy with 273K miles. Bought it new in 96 and paid $23K cash for it. I like to get my money worth out of cars as it is only a form of reliable transportation for me. Also I hate paying finance on a depreciating asset and debt in general.
Last edited by jarhead1 on Mon Aug 15, 2016 10:45 am, edited 1 time in total.

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Re: buying used car smarter than buying new?

Post by rbaldini » Mon Aug 15, 2016 10:41 am

I believe the rate of depreciation is fastest when the car is young and expensive, so the depreciation cost of old cars is less than that of new cars. It's for this reason, I believe, that used cars are cheaper overall.

So why do people still buy new cars? That they fetch a higher price implies that plenty of people value them highly. I guess with a new car, you don't have to worry about how the prior owner treated it. It is entirely yours - a clean slate. A new car is also likely to have fewer annoying problems, which I suspect many people very much appreciate. And, of course, it will have all the newest gadgetry. If these are important to you, go ahead and buy new.

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GordonG
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Re: buying used car smarter than buying new?

Post by GordonG » Mon Aug 15, 2016 10:45 am

Thanks for the replies. To give a few more details about myself....I've bought (financed) several new cars over the years and thought having a "cool" car was very important. I now own a heavily modified performance car, and while it is awesome, I think it will be the last "fancy" car I own. Now that I'm getting older (and hopefully wiser), I've realized that cars are a fairly massive waste of money. I will probably end up keeping the sports car forever since I've put a lot of money into it and would probably only get back half of what it's worth to me.

Anyway, the SUV will be the daily driver (especially in the winter), so at this point, I just want something practical and useful for getting around, carrying my kayak, storage, etc. For me, a late-model, certified used vehicle seems to be a wise choice. Some of the older threads on here seem to support that, too.

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Re: buying used car smarter than buying new?

Post by Miakis » Mon Aug 15, 2016 10:47 am

I had a recent experience with this. I was in favor of new, and my husband said I should buy used.

I ended up buying a low mileage (6000 miles) 2015 model of the car I wanted. They only had one though, so if hadn't been available, I would have bought new.

They had some very good deals on demonstration model new cars with 0% financing - but not in the specific car I wanted. So if that 2015 hadn't been available, I would have waited a couple of months for the 2016s to go on sale and I'd have looked for a demonstration model again then. With the financing deal and demonstration special price, there wasn't a significant difference between the 2016 new price and the low mileage used price on a 2015 or 2014.

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GordonG
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Re: buying used car smarter than buying new?

Post by GordonG » Mon Aug 15, 2016 10:51 am

dm200 wrote:Especially if you have excellent credit, new (or late model) auto loan financing has very low interest rates. It can make a lot of sense to finance a car purchase so you can reduce other consumer credit balances and/or fund longer term investmnts.
I can get a 2014 SUV for about $18,500. The comparable 2016 model starts at about $26K. That's almost a 30% savings. I like the idea of someone else taking that initial depreciation hit. The used SUV is low mileage (around 30K) and comes with a decent warranty.
I would not consider two model years old at 30,000 miles as "low mileage". Let's say you drive 15,000 miles per year and target 150,000 miles and ten years on a vehicle. Using your numbers and assuming zero value at the end of life (10 years and 150,000 miles), that would be $2,600 per year for the new SUV and $2,313 per year for the used one (8 more years). That is less than $300 per year difference. It would not be unreasonable that the used vehicle would (or might) have maintenance/repair costs higher than the new one.

I think the "depreciation hit" for the first few years is often overestimated. Using your $26K (I assume MSRP), and if you could get it for $25,000 - then the new/used difference narrows.

Some long time friends of ours have purchased mini-vans for many decades - and drive them a long time. In recent years, they purchased late model used. Last month, when their minivan died, they purchased a new model because (to their surprise) there was no real break on a late model used.
The particular SUV I'm looking at was a leased vehicle, so I'm assuming the yearly cap was set around 15K miles. For some perspective, my last vehicle was a used Jeep with about 95K miles on it. I drove it for almost 5 years and put under 30K miles on it in that time. So I figure it'll take me another 5 years to put 30K on the "new" SUV. That'd put me at 60K miles in 2021, and it should still have a lot of life in it after that. It's a Nissan, so hoping it's fairly reliable.

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dm200
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Re: buying used car smarter than buying new?

Post by dm200 » Mon Aug 15, 2016 10:54 am

When we were driving many more miles and buying new, we always were very, very adamant to get the exact car, model, features, etc. that we wanted/needed and were willing to pay for. Sales folks always want to sell you a vehicle that is on the lot - and those often had features, etc. (with a higher cost) than we wanted. We also learned that sometimes getting a "package" with more features was less expensive than getting the features we wanted separately. Since it was our plan to drive the car a long time, we did not care whether certain features would give a better trade-in. As I recall, it was very common that the new car exactly as we wanted might be 10% less (MSRP) than the typical car on the lot that would meet our needs - because the ones on the lot had more than we wanted/needed.

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Re: buying used car smarter than buying new?

Post by bluelight » Mon Aug 15, 2016 10:55 am

We have purchased 2 cars (Porsche and Audi) that were Certified Pre-Owned with under 30K miles. Both auto makers have excellent CPO programs. It allowed us to get more car (higher trim level, additional safety features) at a lower price than we would have paid for a new base model. So far both have worked out well, so I will go that route when it comes time to replace my SUV. We also pay cash for our cars, last car loan was over 10 years ago.

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Re: buying used car smarter than buying new?

Post by Mike Scott » Mon Aug 15, 2016 10:58 am

It depends. The one we bought new last winter was cheaper than the exact car from the used lot. The used one was same year, model etc but with about 10K miles on it. My only guess is that there are a few people who are so stuck on the used cars are better mantra that they don't even compare prices. There may be other models that do have a big depreciation hit and therefore would be priced differently.

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Re: buying used car smarter than buying new?

Post by TonyDAntonio » Mon Aug 15, 2016 11:04 am

I have always bought new cars. Nothing fancy, always the low end model and then driven them into the ground. Threads like this have got me thinking about buying used but it probably doesn't make much difference in my case. One thing that always makes me buy new is that by the time I've driven my old car into the ground I'm a bit worn out from all the little maintenance items I've dealt with on my old car that in most cases have gone on for years. The first few years of driving a new car I'm almost assured of just having to do oil changes and filter changes. I still do most of this car stuff myself.

tj218
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Re: buying used car smarter than buying new?

Post by tj218 » Mon Aug 15, 2016 11:07 am

Last month I bought a new 2016 Accord (EX). I drive about 20k miles annually and intend to drive it to the ground.

If you plan on driving it to the ground or trying to go over 200k, if you can afford it you are better off going new. I worked the math out and ultimately I was paying for 2-3 years of mileage on a 2014, but only saving a year's worth of car payments. This is how I did it and it may not be of use to you. I calculated my monthly payment on a new car and multiplied it by 12. Then I figured out how many miles I planned on putting on the car annually. So if annual payment = $3,600 and it has 1.5 years worth of miles (30k miles) on it, I was looking for a $5,400 discount off a new car price to make it break-even. But I was lucky if I could find a $3,000 discount. I found one that was about $4,000 off the new car price but then I saw it's tires were going to need to be replaced in less than 6 months.

If you are a low mileage driver, going used may make sense, at 15k the equation leans slightly towards used, at 10k annually used is likely a better deal. Don't forget to look at the service schedule, at 30k, you may get it for 30% off sticker, but it may need new tires soon and brakes, so add an extra $1,500 to the price for that. At 60-90,000 miles, tires and brakes but also does the vehicle have a timing belt? If so that is another $1,000 on top of that. Plus you have the uncertainty of how the previous owner maintained the car, it just didn't make sense to go late model used for my situation, but it may for yours.

Finally I find it much easier to haggle on new car prices vs. certified pre-owned. Every car dealership knows you can get a 2016 at any dealer, but when you show up on the lot looking at that specific used car, they know they have leverage.

Hope some of this helps.
Last edited by tj218 on Mon Aug 15, 2016 11:16 am, edited 2 times in total.

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Re: buying used car smarter than buying new?

Post by Watty » Mon Aug 15, 2016 11:09 am

GordonG wrote: For example, I can get a 2014 SUV for about $18,500. The comparable 2016 model starts at about $26K. That's almost a 30% savings.
Instead of looking at it as a percent discount, look at the annual cost of owning the car. The things like gas, insurance, routine maintenance, etc will be about the same with any car so in this example I would look at it as just the depreciation and non-routine maintenance.

These numbers are just made up but you can change the assumptions if you want.

Assume

1) You will keep either car until it is ten year old then sell it for $4,000

2) The 2014 is three years old since it has 30k miles on it and the 2017 cars are already out.

3) You will have the same costs when either car is 4 to 10 years old so those can be ignored for price comparison. The insurance costs and car registration will be a bit higher for the new car in year 1 to 3 but these will be more than offset by the full warranty.

This means that;

1) The new car will cost $22,000 over 10 years or $2,200 a year.

2) The 2014 will cost $14,500 over seven years or $2,072 a year.

One additional issue is that the used car with 30K miles is likely due for new tires soon and if they cost $700 that bumps the cost up to $2,172.

At that price I would go with new car.

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Re: buying used car smarter than buying new?

Post by poker27 » Mon Aug 15, 2016 11:25 am

While not in the market, I've been curious what is available out there. Reading on a forum, folks were buying new 2015 accord sports for under 20k. I then looked up used models on ebay and craigslist, and the bulk were more expensive.
Cars I have been looking at...

Accord - Would buy new
Infiniti Q50 - would buy used, $10-15k off for 2 years old and 25k miles
Mazda 6- Would most likely buy used, $3-5k off for 2 years old and 30k miles

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Re: buying used car smarter than buying new?

Post by lemonPepper » Mon Aug 15, 2016 11:35 am

do you have a reliable mechanic? Are you knowledgeable about cars? I think if you are not then used cars may not save you as much money. That's what happened to me until I took the time to learn about car maintenance and found a reliable mechanic.

I have bought a new and an old car. The new car buying process is simpler and I could buy exactly what I wanted. I looked for a used honda/toyota with low mileage and didn't see any significant discounts. OF course you have to haggle and that takes time. So I ended up buying new. I financed at 3.3% and paid off fast.

Before that I had bought an older car that I paid $5k for. The nice part is it has much lower insurance than the new car. Registration is also low. The difference pays for the annual maintenance.

When this car dies, I will probably replace with another car for about $10k. I like not having to pay too much for insurance/registration.

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GordonG
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Re: buying used car smarter than buying new?

Post by GordonG » Mon Aug 15, 2016 12:23 pm

Yeah, I agree that some of this depends on the car. I looked at Jeeps, and the some of the used ones were also around $18-19K, while brand new was a little over $20K. For such a small difference in price, just buying new would make sense.

I hoped to get more mileage out of my Jeep (at 121K) now, but I think it's about done. The AC is broken, it's rusting out and I've noticed very high oil consumption lately. On top of that, the trade-in value is only around a grand. This time around, I'm looking to go used, but certified used seems like a safer bet. The Nissan SUV has gone through a 100+ point inspection, and they just put new tires and brakes on.

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Re: buying used car smarter than buying new?

Post by bottlecap » Mon Aug 15, 2016 12:24 pm

The price of used cars does appear to have risen over the last half-decade, but I still think buying used makes a lot of sense.

It helps to be selective, to have a mechanic, and to know a little bit about cars, too. Also check the internet about common problems with the make and model.

Know that your "new" used car may need significant maintenance items, such as tires, belts and brakes, as this is what people tend to use as an excuse to sell and buy new cars. Look for this and adjust your bid price accordingly.

How much better of a "deal" you get on your used car likely varies a lot depending on the make and model.

Good luck,

JT

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Re: buying used car smarter than buying new?

Post by southbay » Mon Aug 15, 2016 12:33 pm

the best used vehicle purchase i made was a 5 year old SUV for 1/3 the cost of new with around 40k miles on it. i easily sold it 5 years later for price i paid. :beer

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dm200
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Re: buying used car smarter than buying new?

Post by dm200 » Mon Aug 15, 2016 12:35 pm

One problem with getting a lower purchase price on used cars seems to be that the "best" used cars tend to be the most popular models, and that tends to drive up the price. If only you could find a great used car - that was very unpopular. I suspect that with ratings and feedback all over the online internet, that might be more difficult these days. I wonder, though, if there might be some "niche" models in that category? Perhaps a good manual transmission car where hardly anyone wants anything but an automatic?

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Re: buying used car smarter than buying new?

Post by rick2427 » Mon Aug 15, 2016 12:44 pm

We use our cars for a long time (12+ years)
I also hate the entire car buying experience at the dealerships and dread the uncertainty that comes with buying a used vehicle.....so we only buy new cars.
This way we know we are not buying someone else's problems.

Thanks

azanon
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Re: buying used car smarter than buying new?

Post by azanon » Mon Aug 15, 2016 12:50 pm

I don't see it as an issue of which option is "smarter". I simply don't want someone else's car, so I buy a "new" car - that's not an issue of smart or not. My current car, has always been my car, and I know exactly what's been done to it, and perhaps more importantly, what hasn't been done to it.

Most depreciations I've seen make complete sense to me. A car depreciates the most the first year, because the person buying new knows how the car's been treated, cause he's/she's the only historical owner, and presumably the most enjoyable time to own a car is when its new. So, yeah sure, that first year is going to cost the most, and as well it should.

Now I'm trying to think of anything I buy "used", and for the life of me, I can't think of anything. Maybe I just don't want other people's stuff. And fortunately I make enough money that it's a choice for me.

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Re: buying used car smarter than buying new?

Post by cfs » Mon Aug 15, 2016 12:54 pm

Never again.

-- First used car a Toyota Corolla: Totally unreliable, thousands of dollars in repairs, what a freakin' waste of money, finally gave the car to my brother in law, the car died and was buried somewhere south of the border.
-- Second used car Nissan Maxima: Totally unreliable, thousands of dollars in repairs, what a freakin' waste of money, currently parked on the other side of the street, wait, I better take a break and go out there to make sure it wasn't towed away last night!

Thanks for reading.
~ Member of the Active Retired Force since 2014 ~

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Re: buying used car smarter than buying new?

Post by azanon » Mon Aug 15, 2016 12:58 pm

So yeah, used car proponents will often talk about letting someone else "take the hit", then you get it a couple of years later. I guess by taking a "hit", they mean those first couple of years where the car smells outstanding, drives like a dream, lots of people notice your new car, your services are free (cause they're under warranty), and on and on. If that's taking a hit, it's a pretty darn enjoyable one.

If you're really good at negotiating your new car price, and a couple of years later you can find someone who, well, .... isn't, that "hit" is often not bad at all. :beer
Last edited by azanon on Mon Aug 15, 2016 1:01 pm, edited 1 time in total.

hcj
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Re: buying used car smarter than buying new?

Post by hcj » Mon Aug 15, 2016 1:00 pm

Agree about the make of the car. I would never buy a Toyota or Honda used. They're not that expensive to start with and the resale is insanely high. It's more advantageous to buy new and be the first owner and then sell it to someone else down the line.

But now Audi... we have a great mechanic who only works on Audis and VWs, and we've had very good (low maintenance/repair) experiences owning Audis. So we buy them used.

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Re: buying used car smarter than buying new?

Post by leod » Mon Aug 15, 2016 1:03 pm

friends have been buying new and was surprised with all the incentive they get that buying used does make little difference, plus the interest rates they get is like 0% or 1%

also, you usually buy new tires and change brakes in a few months if you buy used and you dont know the history of the vehicle.

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Re: buying used car smarter than buying new?

Post by azanon » Mon Aug 15, 2016 1:04 pm

hcj wrote:But now Audi... we have a great mechanic who only works on Audis and VWs, and we've had very good (low maintenance/repair) experiences owning Audis. So we buy them used.
This is why I'm "stuck" with my 2012 GTI. I know it's essentially .... perfect (truly excellent condition), but those resales are really low for VW so, guess what, ... I guess no one gets my current car. I'd be giving it away for those resale values, simply because so many other VW's have problems.

So that's maybe a reason TO be caution. If someone got a good one like I did, I'm sure as heck not "giving it away" due to a ridiculously low resale value.

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Re: buying used car smarter than buying new?

Post by southbay » Mon Aug 15, 2016 1:05 pm

hcj wrote:Agree about the make of the car. I would never buy a Toyota or Honda used. They're not that expensive to start with and the resale is insanely high. It's more advantageous to buy new and be the first owner and then sell it to someone else down the line.

But now Audi... we have a great mechanic who only works on Audis and VWs, and we've had very good (low maintenance/repair) experiences owning Audis. So we buy them used.
a 1 year old Toyota or Honda won't save you much, but i paid 1/3 the price of new for a 5 year old Toyota.

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Re: buying used car smarter than buying new?

Post by MrNewEngland » Mon Aug 15, 2016 1:07 pm

I just bought a used Wrangler, but only because I got a super good deal on it. Those hold their value so well that I was going to buy a new one. I had been looking for a LONG time and the problem with used ones is that they're usually pretty beat. I found this one this weekend and it was really inexpensive, I doubt it was ever off the pavement, and it was the specific vehicle I wanted. So I finally got the vehicle I wanted. YMMV

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Re: buying used car smarter than buying new?

Post by azanon » Mon Aug 15, 2016 1:23 pm

southbay wrote:
hcj wrote:Agree about the make of the car. I would never buy a Toyota or Honda used. They're not that expensive to start with and the resale is insanely high. It's more advantageous to buy new and be the first owner and then sell it to someone else down the line.

But now Audi... we have a great mechanic who only works on Audis and VWs, and we've had very good (low maintenance/repair) experiences owning Audis. So we buy them used.
a 1 year old Toyota or Honda won't save you much, but i paid 1/3 the price of new for a 5 year old Toyota.
I think we just need to remember "save*" needs an asterick. The sentence sounds catchy cause if you're not careful, because it can trick your mind into thinking you're getting the same thing for 1/3rd the price. In reality, a new car is worlds apart from a 5 year old one, regardless of miles or condition.

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Re: buying used car smarter than buying new?

Post by randomguy » Mon Aug 15, 2016 1:25 pm

GordonG wrote:From what I've read, it seems that buying used is usually a smarter choice. For example, I can get a 2014 SUV for about $18,500. The comparable 2016 model starts at about $26K. That's almost a 30% savings. I like the idea of someone else taking that initial depreciation hit. The used SUV is low mileage (around 30K) and comes with a decent warranty.
No it isn't. You are paying 30% less AND getting x% less usage. How those numbers interact determines your true savings. 10-20% tends to be the normal range depending on how smart you are buying new (i.e. buying a 2016 new now gets you in for a lot cheaper than buying a 2017 new. If you drive them both into the ground, buying a year old doesn't hurt you) or used (CPO have inflated prices, you might get a screaming deal on some private sale).

In the end how you own the car (drive it for 10-15+ years versus replacing every 3-4 years) matters more than how you buy whenever I run the numbers. Note I don't look at buying really used (10 years, 100k+ miles). That can be really cheap but you are playing repair roulette.:) And a lot depends on how much you value your team. In theory you should be able to buy a car for a couple thousand below market and sell it for above market prices. But that takes time on both sides of the transaction.

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Re: buying used car smarter than buying new?

Post by GordonG » Mon Aug 15, 2016 1:26 pm

azanon wrote:So yeah, used car proponents will often talk about letting someone else "take the hit", then you get it a couple of years later. I guess by taking a "hit", they mean those first couple of years where the car smells outstanding, drives like a dream, lots of people notice your new car, your services are free (cause they're under warranty), and on and on. If that's taking a hit, it's a pretty darn enjoyable one.

If you're really good at negotiating your new car price, and a couple of years later you can find someone who, well, .... isn't, that "hit" is often not bad at all. :beer
By the "hit", I just mean the ~20% loss you take by just driving it off the lot.

I guess I should've said "certified used car" in my title. There is a world of difference between the certified SUV I'm looking at and the used Jeep I bought with 95K miles on it. The SUV looks brand new, it's got a 7 year/100,000 mile warranty (about 5 years or 70,000 miles left now), has new tires, new brakes, etc. My days of buying cars as status symbols are over. I'd rather spend my money on more important things.

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Re: buying used car smarter than buying new?

Post by Dicast » Mon Aug 15, 2016 1:32 pm

dm200 wrote:One problem with getting a lower purchase price on used cars seems to be that the "best" used cars tend to be the most popular models, and that tends to drive up the price. If only you could find a great used car - that was very unpopular. I suspect that with ratings and feedback all over the online internet, that might be more difficult these days. I wonder, though, if there might be some "niche" models in that category? Perhaps a good manual transmission car where hardly anyone wants anything but an automatic?
I tend to put a plug in for my used car in these topics. I drive a Hyundai Genesis. MSRP was $36k 2 years old with 40k miles, bought it for 17.7k, 19k all fees included. 330hp, 28-30 mpg on the highway, smooth, quiet. I've put almost 25k miles per year x2 years and still love the feel and performance of the car. Only oil changes and tires so far. I think it is the best quality car for the price.

I have yet to find a perfect SUV niche product that is as nice and as unpopular.

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Re: buying used car smarter than buying new?

Post by Elsebet » Mon Aug 15, 2016 1:39 pm

My truck I bought this year was new because it's hard to find a used Toyota Tacoma v6 manual. I traded in a 15 year old Celica when I bought it.

I bought my Honda new in 2006 because again I wanted a manual and it was difficult to find one used. In ~10 years when it's time to replace that car I may try the used market unless self-driving cars are the norm by then. :)

We keep cars a long time and like manual transmissions so it's not a big deal for us to buy new.
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Re: buying used car smarter than buying new?

Post by randomguy » Mon Aug 15, 2016 1:43 pm

GordonG wrote:
azanon wrote:So yeah, used car proponents will often talk about letting someone else "take the hit", then you get it a couple of years later. I guess by taking a "hit", they mean those first couple of years where the car smells outstanding, drives like a dream, lots of people notice your new car, your services are free (cause they're under warranty), and on and on. If that's taking a hit, it's a pretty darn enjoyable one.

If you're really good at negotiating your new car price, and a couple of years later you can find someone who, well, .... isn't, that "hit" is often not bad at all. :beer
By the "hit", I just mean the ~20% loss you take by just driving it off the lot.

I guess I should've said "certified used car" in my title. There is a world of difference between the certified SUV I'm looking at and the used Jeep I bought with 95K miles on it. The SUV looks brand new, it's got a 7 year/100,000 mile warranty (about 5 years or 70,000 miles left now), has new tires, new brakes, etc. My days of buying cars as status symbols are over. I'd rather spend my money on more important things.
If you think a car is good for say 10 years/150k miles, how much less would you pay for a 2 year old car with 30k miles? You are buying ~20% less car for ~20% less.:) Again this is a big simplification. You can add in more factors if you want to try for a more exact number.

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Re: buying used car smarter than buying new?

Post by southbay » Mon Aug 15, 2016 1:55 pm

azanon wrote:
southbay wrote:
hcj wrote:Agree about the make of the car. I would never buy a Toyota or Honda used. They're not that expensive to start with and the resale is insanely high. It's more advantageous to buy new and be the first owner and then sell it to someone else down the line.

But now Audi... we have a great mechanic who only works on Audis and VWs, and we've had very good (low maintenance/repair) experiences owning Audis. So we buy them used.
a 1 year old Toyota or Honda won't save you much, but i paid 1/3 the price of new for a 5 year old Toyota.
I think we just need to remember "save*" needs an asterick. The sentence sounds catchy cause if you're not careful, because it can trick your mind into thinking you're getting the same thing for 1/3rd the price. In reality, a new car is worlds apart from a 5 year old one, regardless of miles or condition.
No question a new car is nicer. I drive one now. But if stretching your dollars and value is the goal, used cars can be better.

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Re: buying used car smarter than buying new?

Post by GordonG » Mon Aug 15, 2016 2:21 pm

randomguy wrote:
GordonG wrote:
azanon wrote:So yeah, used car proponents will often talk about letting someone else "take the hit", then you get it a couple of years later. I guess by taking a "hit", they mean those first couple of years where the car smells outstanding, drives like a dream, lots of people notice your new car, your services are free (cause they're under warranty), and on and on. If that's taking a hit, it's a pretty darn enjoyable one.

If you're really good at negotiating your new car price, and a couple of years later you can find someone who, well, .... isn't, that "hit" is often not bad at all. :beer
By the "hit", I just mean the ~20% loss you take by just driving it off the lot.

I guess I should've said "certified used car" in my title. There is a world of difference between the certified SUV I'm looking at and the used Jeep I bought with 95K miles on it. The SUV looks brand new, it's got a 7 year/100,000 mile warranty (about 5 years or 70,000 miles left now), has new tires, new brakes, etc. My days of buying cars as status symbols are over. I'd rather spend my money on more important things.
If you think a car is good for say 10 years/150k miles, how much less would you pay for a 2 year old car with 30k miles? You are buying ~20% less car for ~20% less.:) Again this is a big simplification. You can add in more factors if you want to try for a more exact number.
At my rate of driving, it'd take me 25 years to put 150K miles on a car, so for the sake of argument, say the Nissan lasts 10 years. If the 2014 Nissan is $20K out the door, and the 2016 is $28K, we have an $8K spread

Like someone roughly calculated earlier in this thread, the new car would cost $300 more per year than the used. Doesn't seem like a huge difference, but it adds up over the years. After the first year, it's $300 more costly, $600 after the second, and so on. So assuming both cars last 10 years, I'll have spent an extra $8K for two extra years of driving.

Another consideration is if I paid in full for the used car, but financed the new one. I'd end up spending even more in the long run due to interest. I'll admit, there's more to this kind of decision than meets the eye. Lots of variables.

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Re: buying used car smarter than buying new?

Post by GordonG » Mon Aug 15, 2016 2:24 pm

southbay wrote:
azanon wrote:
southbay wrote:
hcj wrote:Agree about the make of the car. I would never buy a Toyota or Honda used. They're not that expensive to start with and the resale is insanely high. It's more advantageous to buy new and be the first owner and then sell it to someone else down the line.

But now Audi... we have a great mechanic who only works on Audis and VWs, and we've had very good (low maintenance/repair) experiences owning Audis. So we buy them used.
a 1 year old Toyota or Honda won't save you much, but i paid 1/3 the price of new for a 5 year old Toyota.
I think we just need to remember "save*" needs an asterick. The sentence sounds catchy cause if you're not careful, because it can trick your mind into thinking you're getting the same thing for 1/3rd the price. In reality, a new car is worlds apart from a 5 year old one, regardless of miles or condition.
No question a new car is nicer. I drive one now. But if stretching your dollars and value is the goal, used cars can be better.
To be honest, I don't care about nice. I just want it to do well in the snow and get me to where I'm going. Looks wise, I think about 90% of the SUVs today look the same anyway. I don't really care too much about the high-tech gadgetry, either.

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Re: buying used car smarter than buying new?

Post by Hector » Mon Aug 15, 2016 2:28 pm

GordonG wrote:From what I've read, it seems that buying used is usually a smarter choice. For example, I can get a 2014 SUV for about $18,500. The comparable 2016 model starts at about $26K. That's almost a 30% savings. I like the idea of someone else taking that initial depreciation hit. The used SUV is low mileage (around 30K) and comes with a decent warranty.
I would get used one in this scenario.

I was thinking the same way as this when I was looking for a car, but ended up buying the new one. I found out that people do not buy base models often. I could not find used base model in san francisco bay area after looking for over a month that could save me 25-30% in scenario you mentioned. In fact, I waited for a new car for over a month because I wanted base model (in one of the most popular colors). I learned that dealers generally do not sell base model and that might be the reason people not buy them. In fact after agreeing on a price, model and color, dealer did not contact me when he was going to receive that model. I was looking at upcoming inventory online and contacted dealer when I saw the car I wanted was listed under upcoming delivery.

I am sure that you know the fact new cars cost less than what MSRP suggest.
GordonG wrote: Also, regarding financing: what is the general Bogleheads advice? In this scenario, is it better to pay cash or finance? I've read advice that advocates both ways. On one hand, if I get a low interest rate loan, say 4%, I could keep a large sum of my money invested and (maybe) make more than that. On the other hand, I've heard advice saying "cash is king", and it's better to just buy it outright. I have a significant amount saved, so spending this amount of money right now would not put me in any kind of financial jeopardy. Not sure if it's the wisest move, but paying cash is what I'd prefer.
I would not pay 4% interest rate to buy a car today if I can pay cash.

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Re: buying used car smarter than buying new?

Post by Jack FFR1846 » Mon Aug 15, 2016 2:48 pm

MrNewEngland wrote:I just bought a used Wrangler, but only because I got a super good deal on it. Those hold their value so well that I was going to buy a new one. I had been looking for a LONG time and the problem with used ones is that they're usually pretty beat. I found this one this weekend and it was really inexpensive, I doubt it was ever off the pavement, and it was the specific vehicle I wanted. So I finally got the vehicle I wanted. YMMV

Really good point. I spent about 6 months looking for a 2 year old Wrangler Unlimited for a reasonable price. Not only was I unable to find one with the equipment I wanted (rear LSD was a requirement), when I gave up and ordered a new one, it was $2k cheaper than any of the 2 year old ones I found.
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Re: buying used car smarter than buying new?

Post by Mingus » Mon Aug 15, 2016 2:59 pm

jarhead1 wrote: I just bought two beautiful used cars last year. 2013 Subaru outback and 2014 Nissan maxima, paid cash. please note they are certified pre-owned by the manufacturer. I would not do it any other way, unless you just want an low priced egg beater to get you around. I went to the car guru website and
.
I'm not sure how much Certified pre-owned really means.

I test drove a "certified pre owned Honda" a few years ago. The car stunk of cigarette smoke, and really did not drive like a vehicle that was taken care of, and certainly not worthy of the premium that is added to sales price to meet so called certified pre owned criteria.

But, I can confidently state that certifiably, the car was pre-owned and indeed not new.

Perhaps this example was this specific Honda dealer's practice. But I wouldn't necessarily put too much stock into certified pre owned meaning anything other than its a sticker attached to the windshield of a vehicle in a car lot; and that sticker adds a couple thousand dollars to the price. I guess there is some additional warranty coverage though.

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Re: buying used car smarter than buying new?

Post by randomguy » Mon Aug 15, 2016 3:16 pm

GordonG wrote:
At my rate of driving, it'd take me 25 years to put 150K miles on a car, so for the sake of argument, say the Nissan lasts 10 years. If the 2014 Nissan is $20K out the door, and the 2016 is $28K, we have an $8K spread

Like someone roughly calculated earlier in this thread, the new car would cost $300 more per year than the used. Doesn't seem like a huge difference, but it adds up over the years. After the first year, it's $300 more costly, $600 after the second, and so on. So assuming both cars last 10 years, I'll have spent an extra $8K for two extra years of driving.

Another consideration is if I paid in full for the used car, but financed the new one. I'd end up spending even more in the long run due to interest. I'll admit, there's more to this kind of decision than meets the eye. Lots of variables.

Yep you pay 8k for 2 more years of driving. But you "only" saved 3-4k (depending if you are keeping that used car 8 or 10 years) by buying used not 8k since you would have paid 4-5k to drive the used car. Obviously use your numbers. The point is you are giving up 2 years/20k miles and there is some value there. For you you wouldn't get 2 more years of driving. You would be looking at 5 (6k miles/year). Buy new and you can get a subsidized loan so you can invest your money instead of tying it up in a car:). The numbers change a lot depending on assumptions (15 years versus 10, end sale prices, maintence/repair costs, taxes, insurance, cost of money ,....)

Again the point isn't the used isn't cheaper. It almost always is. But the difference can't be determined by looking at OTD prices. If you do that you start doing things like saying buying a 4 year old BMW 5 series is the same as buying a new Honda Accord.

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Re: buying used car smarter than buying new?

Post by Carson » Mon Aug 15, 2016 3:24 pm

We literally just went through this today. It definitely depends on what you are searching for and your specific geography. We were initially considering the crossover/'ute class but prices were very competitive between gently used and new.

After a lot of searching inventories daily, I found a hatchback 2016 with 6,000 miles, at about 80% of the equivalent new car cost. Since 'they' say you lose about 18% of depreciation the first year, I felt it was a good value. Being able to not have to pay that but still get a car with quite low mileage was good for me.

And that lower price point meant we got a 'keeper' of a car (higher trim package) instead of the stopgap that this car was initially going to be.
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Re: buying used car smarter than buying new?

Post by sls239 » Mon Aug 15, 2016 3:37 pm

Don't believe the "rough calculations."

I bought my car at a year and a half old, 14K miles for 28% less than the original purchaser. I know because the paperwork was still in the glovebox.

Just understand that listed prices for used cars are jacked way up. They do that for two reasons

1) Some people look at the listed price of used cars and new cars and then walk on over to the new car section patting themselves on the back for making such a smart decision.
2) Occasionally desperate people come in willing to pay any price to someone who will finance a "reliable car" for them despite their marginal credit.

That doesn't mean they won't sell it to you for significantly less than the listed price.

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Re: buying used car smarter than buying new?

Post by dm200 » Mon Aug 15, 2016 4:20 pm

I bought my car at a year and a half old, 14K miles for 28% less than the original purchaser. I know because the paperwork was still in the glovebox
While this documents one scenario, it is very possible that the original purchaser paid "too much" and/or bought expensive add-ons. This is probably (depending on when you bought) two model years old.

The better comparison would be (if the same car is available) the two model year old vehicle with 14K miles vs. new (both out the door price).

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